Knowing your numbers: 3 tips from General Catalyst

Scott Cormier

Let’s be upfront: If your startup doesn’t have a tight handle on its financials, your chances of securing (much less retaining) venture capital will be slim. 

Take it from Zak Kukoff, Investor at General Catalyst, a VC firm backing top-tier entrepreneurs across multiple stages and sectors — with a portfolio of names like Airbnb, BigCommerce, Canva, GitLab, HubSpot, Instacart, Snap, and Stripe. 

For our expert funding series, the Puzzle team sat down with Zak to unpack topics including: 

  1. Why knowing your financials is crucial to securing VC funding
  2. The 3 difficult financial lessons every founder needs to learn
  3. What VCs want to see in your monthly investor updates

Let’s dive in. 

“​​In the boom period of 2021, maybe you could’ve gotten away with some financial irresponsibility. But being fiscally responsible today is one of the best things you can do to give your startup a chance at surviving and ultimately winning.” 

Why knowing your financials is crucial to securing VC funding

In Zak’s words, pitching to investors is trying to sell a dream. 

To raise money from a firm, that VC must believe your startup can become a $10-billion company — something few businesses will ever accomplish. 

And, in the end, it comes down to how well you know your numbers. That VC needs to believe: 

  1. Your market is large enough — This requires knowing the stats behind the size of your market and audience. 
  2. Customers are willing to spend in that market — This requires knowing the average target customer’s budget size. 
  3. You are talented enough to sell to those customers — This requires knowing how exactly you will get to those customers. Who is the buyer? What do your budget and strategy for marketing and sales look like? 

Not knowing your numbers will leave you vulnerable

Conversely, if you don’t watch your numbers, you may end up with your back against the wall. 

At the pre-seed and seed stages, the most important question you can ask is: 

“When will my company run out of money?” 

If you fail to check in consistently, you may look up one day and suddenly find you have 4–5 months of runway left — and scramble to raise cash. 

Trying to raise from VCs who know you have minimal runway will then expose you to bad actors in the ecosystem: investors who’ll string you along until you have almost nothing in the bank and then force your hand to accept horrific terms. 

Those are the potential consequences of overlooking your financials. And that’s why you must know your burn at all times, especially in current market conditions

Zak expects every founder he supports to know how much money is in the bank every day. 

“The companies that didn’t survive 2008 were those that didn’t understand why they were burning so many dollars or how to get back to reasonable, responsible burn to right the ship.” 

The 3 difficult financial lessons every founder needs to learn

Cash is only one perk that startups gain from their investors. Zak prioritizes instilling hard-earned wisdom about financial hygiene in his investments. 

This advice tends to be candid or, as he admits, the kind of lessons industry folks might shy away from giving out loud. Below, he outlines three of these. 

1. Accept the reality of the current macro environment

If a founder continually avoids bookkeeping and accounting, there’s a strong chance they assume they’ll always be able to raise more money

So, the first major piece of advice Zak provides behind closed doors is: 

Wake up and get with the new reality of today’s market conditions. I believe Investors are more conservative than ever (and for good reason). If you do not prioritize diligent tracking of runway, burn, etc., you give VCs even less motivation to fund you. 

2. Understand the key drivers of your monthly burn

At least once a month, sit down to ensure you know what processes, tools, and other dependencies you dedicate runway to. (One of those will undoubtedly be human capital, which is the largest driver of burn for most early-stage teams.) 

From there, leverage tools like Puzzle to understand how your spending compares to benchmarks set by other startups in similar industries, stages, and so on. 

3. Make sure everyone on your payroll is worth the funds

Since the largest portion of your burn will likely be people, you must make sure every salary you pay is worth the while. The classic advice to founders is: Hire slow, fire fast. 

Some questions to consider on this front include: 

  • Is this employee scrappy enough? Do they demonstrate a strong growth curve? 
  • Do they really want to be here for the whole journey? Or are they just riding things out? 

If they’re struggling in performance, you can coach them through it. But if they show little improvement across a few months, it may be time to let them go. 

“One day of startup time feels like six months at a public company. You need to find folks who can work on that accelerated timeline — and it may take a while to hire them. That’s some candid advice I don’t hear people say aloud too often.” 

What do VCs want to see in your investor updates? 

Zak recommends taking this quote by Paul Graham as a rule of thumb: 

“When startups are doing well, their investor updates are short and full of numbers. When they're not, their updates are long and mostly words.” 

If you write your updates “very crisply and succinctly,” as Zak advises, it should take an investor less than five minutes to open up your email and figure out: 

  1. “How is my investment performing and growing at the moment?” 
  2. “What roadblocks are they facing? What key actions can I take to assist?” 

Concise, accurate updates are based on numbers

At any given moment, your investor may be juggling anywhere from 3–30 companies

Tracking the health of all of these investments is made dramatically simpler by performance-focused, numbers-based monthly updates. 

While KPIs obviously vary from startup to startup, Zak generally advises including: 

  • Users — Your absolute number of active users on a daily, weekly, and monthly basis
  • User retention — Your retention of customers across 30, 60, and 90 days
  • Revenue — As well as your revenue growth (if it’s relevant to your company)
  • Net dollar retention — If your company is later-stage enough to demonstrate expansion

As an investor in pre-seed and seed-stage enterprise tech, Zak typically highlights revenue, NDR, and user growth. 

For consumer businesses, he emphasizes user growth and retention, whereas you may not see revenue for 2–3 years. And you may never have to consider NDR. 

Your investors cannot help you if you don’t know where you need it

Let’s say you have a leaky top-of-funnel flow. Users are flooding in, yet you’re only retaining 15% of them in a 30-day period. 

Or, let’s say your hosting bills have climbed gradually but significantly within a year. 

Both of these situations could be quickly solved through your investor update: Ask your network to recommend 3–5 experts they trust in SaaS retention or reducing AWS costs. It’s an easy fix. 

But it requires knowing your financials and where you’re bleeding in the first place. 

Your investors want to help you thrive. They can’t do so without the numbers. 

“There are very straightforward, tangible things that VCs can do to help your startup. But they can only do them if you know to ask. And you can only know to ask if you know your numbers as you write the update.”

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Scott Cormier
Product @ Puzzle

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